Housing Market 2023: Florida Boom May Crumble As Insurance Cuts Signal Crash
Farmers Insurance recently indicated it will no longer offer coverage in Florida — the third major insurer to pull out of the state so far this year, with AAA being the fourth — in a move that will affect thousands of residents, according to CBS News. The pullback might also hinder the housing market, which has been one of the hottest in the country as of late.
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“We have advised the Florida Office of Insurance Regulation of our decision to discontinue offering Farmers-branded auto, home and umbrella policies in the state,” Farmers spokesman Trevor Chapman stated to CBS Miami.
“This business decision was necessary to effectively manage risk exposure.”
AAA followed suit, suggesting it would not renew home and car insurance for some of its policyholders in the state. AAA cited increased natural disaster risk, CBS reported.
“Unfortunately, Florida’s insurance market has become challenging in recent years,” the company told CBS MoneyWatch. “Last year’s catastrophic hurricane season contributed to an unprecedented rise in reinsurance rates, making it more costly for insurance companies to operate.”
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The Florida housing market has been one of the hottest in the country, but now, that trend might soon reverse.
Newsweek, citing a Moody’s report, noted that during the real estate price surge last year, Florida ranked second on a list of 11 states that saw home prices increase by more than 20% in the first quarter. Florida trailed only Arizona and was one spot ahead of Georgia.
But now, because of insurance company pullback, would-be home buyers might take pause — something that would have an immediate effect on the housing market.
“Skyrocketing insurance charges and the complexity of acquiring coverage may discourage aspiring homeowners, potentially triggering a drop in property values,” Professor Itzhak Ben-David, finance professor at Fisher College of Business at Ohio State University, told Newsweek.
According to Redfin, in June, home prices in Florida were down 0.33% compared to last year. Homes sold for a median price of $408,500. Meanwhile, the number of homes sold fell 12.3% — and the number of homes for sale rose 5.1%.
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This article originally appeared on GOBankingRates.com: Housing Market 2023: Florida Boom May Crumble As Insurance Cuts Signal Crash
